The eThekwini Municipality has received a clean audit from the Auditor-General (AG), but red flags have been raised around the City's irregular expenditure, which has doubled since 2020, and issues around the provision of water, sanitation, and electricity.
The AG's unqualified audit report for the City was presented at a full council meeting on Wednesday.
The eThekwini Municipality celebrated the AG's finding, noting that this "noteworthy accomplishment" extends to its entities, the Durban uShaka Marine Theme Park, and the Inkosi Albert Luthuli International Convention Centre (Durban ICC).
"Both these entities secured clean audits. This reaffirms the City's enduring commitment to financial excellence, marking a continuation of its proud record of consistently receiving unqualified audit opinions since its inception," said eThekwini spokesperson, Gugu Sisalana.
Among the findings of the AG, however, was that the City spent only 3.9% of its capital expenditure on repairs and maintenance.
"The continued lack of adequate asset maintenance will further strain an already deteriorating asset network, impacting on the municipality’s ability to effectively deliver on its mandate. The non-provision of services negatively affects the revenue generation of the municipality and further impacts economic growth," the AG report said.
Irregular expenditure has doubled since 2019/20.
According to the AG report, irregular expenditure was R1.1 billion in 2019/20, R770 million in 2020/21, R1.5 bn in 2021/22, and last year, 2022/23, rose to R2.4 bn.
The top contributors to irregular expenditure were as follows: R2.03 bn was as a result of non-compliance with Supply Chain Management (SCM) local content; R211.88 m was due to non-compliance with SCM, including adverts not being adequately advertised; R89.84 m was due to non-compliance with Municipal Finance Management Act (MFMA) section 36; R37.15 m was due to non-compliance with MFMA section 116; and R34.41m arose from City Integrity and Investigations Unit (CIIU) investigations.
According to the AG, the root causes of irregular expenditure in the City were primarily the result of weaknesses in internal controls, which has perpetuated the recurrence of non-compliance and the slow response by management, which has contributed to maintaining compliance with legislation.
The eThekwini Municipality achieved 74.58% of the planned targets for the year against a budget spend of 94.79% in the selected plan to create a quality living environment, the AG reported, noting that some of the planned targets that were not achieved relate to key service delivery indicators on water, sanitation, and electricity.
Other red flags raised by the AG include:
– Not being able to confirm that the performance of suppliers was monitored monthly
– SCM officials participating in processes relating to contracts where family members/partners/associates had an interest
– Municipal officials failing to disclose interests that close family members had in municipal contracts
– Disciplinary proceedings not being instituted by the council where the report of independent investigators confirmed financial misconduct by a senior manager
– Appropriate action not being taken against officials of the municipality where investigations proved financial misconduct
– Payments not always being made within 30 days; reasonable steps not being taken to prevent irregular expenditure;and reasonable steps not being taken to ensure that an effective system of expenditure control was implemented over payments made on the PEP and EPWP programmes.
– The Kingsburgh, Magabeni, Umkomaas, Isipingo, Hillcrest, and Mpumalanga wastewater treatment works did not have valid operating licences.
In its report, the AG said that the overall root causes of significant findings against the municipality were the lack of consequence management for poor performance reporting, project management, and transgressions with relevant legislation.
In addition, slow responses by political leadership, the accounting officer, and management in adequately addressing material internal and external audit issues on performance reporting, compliance with legislation, and infrastructure deficiencies were highlighted, while the slow response by political leadership, the accounting officer, and management in addressing project management issues raised in the prior audits on key projects was also noted.
Worryingly, the AG said that instability in the SCM unit as a result of ongoing investigations of employees in key positions was also a reason for concern.
Sisalana said that the City was aware of challenges outlined by the AG and comprehensive action plans are actively being developed, overseen by key stakeholders, including the City Manager, the Mayor, the Executive Committee, Municipal Public Accounts Committee (MPAC), Audit Committee, and the Department of Cooperative Governance and Traditional Affairs (Cogta).
Commenting on the report, eThekwini Mayor Mxolisi Kaunda said: "While recognising the report's affirmation of the City's excellent financial management and viability, we are committed to continuous improvement.
“Ongoing reviews of controls are under way, and the audit turnaround strategy is being rigorously implemented to rectify issues highlighted by the Auditor-General, including non-revenue water loss, with the goal of achieving a clean audit in the medium term."
Kaunda underscored the City's stability and unity of purpose, citing endorsements from Cogta, financial viability, an investment-grade credit rating, a credible budget, and the recent unqualified audit opinion.
On the matter of consequence management, City Manager Musa Mbhele said accountability remains paramount.
"The City is set to enhance oversight and consequence management for non-compliance and poor performance. Emphasis will be on infrastructure planning, maintenance, and efficient capital project rollout to improve service delivery and job creation. Key objectives include ensuring value for money and maximising the return on investment in infrastructure delivery and maintenance," he added.
eThekwini councillor and the provincial leader of ActionSA, Zwakele Mncwango, called the celebration of the AG’s report by ANC councillors “absurd.”
“With leading issues ranging from crumbling and dilapidating infrastructure, lack of service delivery, irregular expenditure, and the unfailing lack of consequence management drowning the City, it is unfortunate that the ANC celebrates such findings,” Mncwango said.
“Reflecting on the previous financial year's findings, it is horrific that the Municipality still struggles to implement consequence management, with the AG report highlighting the lack of appropriate action against officials where investigations confirmed financial misdemeanours.
“Considering the horrendous state of infrastructure within the Municipality, it is an insult that it has managed to spend only 3.9% of its repair and maintenance budget. We remain dumbfounded about how the Municipality wrote off an overwhelming R3.6 billion due to irregular expenditures. As per the usual standard of the Municipality, we anticipate that no consequences will be taken against those who have been found to have participated in throwing this large sum down the drain,” he added.
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